Ari Wald, Technical Analyst at Oppenheimer, considers whether the S&P 500 is entering a fifth wave of an Elliott Wave cycle.
In his Chart, Wald follows the road map scenario that the bull cycle has been in place since February 2016 and that the S&P is concluding a fourth wave correction and about to embark on a fifth wave higher. His base expectation is that this fifth wave will take the S&P to a new high (2,900).
Wald is concerned, however, that declining market breadth (i.e. the percent of NYSE Stocks above their 200-day moving average) undermines this bullish interpretation, with fewer than 60 percent of stocks currently in an uptrend. As such, his alternate bearish case is that the S&P is in imminent danger of breaking down below the 200-day moving average (around 2,670).
Looking more closely at the characteristics of fifth waves, Wald slightly favours the bullish scenario. He points out that fifth waves are always less dynamic than third waves in terms of breadth (which can often reach above 70 percent) and that a new high can be reached with a breadth figure that only needs to reach above 60 percent.